When it comes time to buy a home and negotiate an offer there is many things to consider. One piece of data that is often misinterpreted by home buyers is days on market or DOM. Days on market will also sometimes be referred to as market times.
While DOM can be a useful bit of information for home buyers, bear in mind there is never one data point that should ever be used exclusively to determine anything when it comes to real estate.
Different data points can be combined like, days on market, current real estate market conditions and a comparative market analysis to formulate a negotiating strategy when formulating an offer on a home you like.
For example a home that in a red hot seller’s market, that is new to the market (1 days on the market) priced right at market value will sell very quickly and will most likely receive multiple offers. As a home buyer you would need to be very aggressive in your negotiating strategy to secure the house as your new home.
Alternately take the same scenario, but change the pricing to 10% over market value and you will most likely see that home languish on the market unsold.
So What is Days On Market or DOM
Days on Market is simply how many days a home has actively been on the market for sale. The clock starts ticking from the moment the home is listed until the time the seller has accepted an offer and the home is put under agreement.
Note, that here in Massachusetts it will also include any time the home was on the market previously in the past 3 months.
Why Should a Home Buyer Pay Attention to Days on Market
While what I am about to say is a bit of a generalization, you will find that many of these statements will prove to be true. Also as I pointed out earlier days on market is just one data point and should be considered along with other data points.
The Tewksbury MA Real Estate Market shows that 176 single family homes over the last 6 months were on the market an average of 32 days before accepting a contract. Realize it is still a strong sellers market in Tewksbury and as the market softens the average market time could become longer.
It is beneficial as a home buyer to know what the average market time is for a given community. It help you gauge the popularity of a given home as well as give you some insight into how you structure your offer.
The Home Seller’s Mindset Regarding Days on Market
Home sellers tend to be a bit unyielding when a home first hits the market. They are confident that their home is worth every penny that they are asking for.
By nature the first 2-4 weeks of a listing will usually see fairly high showing activity. Their confidence will remain high for the first two to three weeks. And, a home seller will generally be less yielding when negotiating an offer.
As they start to hit the 30 day or average DOM, their confidences may start to wane and they will start to second guess their pricing decision. Then they hit 60 and 90 days the home sellers start to panic. When confidence wanes, they will also be less unyielding in their negotiations.
This is not to say a seller will give their house away, but they will have some additional information like feedback and lack of offers to make them look at the pricing of their home a little more realistically.
How Other Home Buyer’s React To Days On Market
When you are buying a home you may find yourself competing with other home buyer’s on good homes. More so in a seller’s market than a buyers market.
What happens when a home is new to the market?
When a home is priced appropriately for the real estate market and prepared properly, it will quickly gain a lot of attention from home buyers. Such a home will look great compared to it’s competition.
Most of the home buyers that come thru in the first week or two are usually the best, most prepared home buyers.
They are the buyers that have exhausted all of the old inventory in the marketplace. You will find that these home buyers have probably viewed all of the old inventory where days on market are starting to creep up, at the very least online if not in person. These first buyers may also have lost good homes from underbidding or being too stringent on negotiating home inspection issues.
If you find a home particularly compelling online so will other buyers. And they are ready to pounce.
If you are newer to the marketplace you could find your self competing with buyers that have been full educated by the marketplace and are ready to step up with a great offer.
Days on Market Is One Data Point That You Should Use to Structure an Offer
With all that said the length a home has been on the market may sway how you structure and negotiate your offer. I
Just because a home is new to the market and you are willing to put in an offer does not mean you will be in a multiple offer situation. You and your real estate agent need to review current market conditions as well as what the fair market value is of the house first.
If you are in a sellers market and the home is priced competitively you will probably find other buyers are immediately interested as well.
When your in this situation and you really want the house, this is not the time to play games. It is time to react quickly and step up an put your best foot forward. Now may be the time to offer full asking price or even over asking. Removing all but the absolute necessary contingencies may also be in order.
Alternately, if you find your self interested in a home that has been on the market for 45-60 days or more, this may give you some breathing room and allow you to push harder on the negotiations. Negotiating hard is far easier when there are no other buyers to compete against. It becomes less likely you will be competing with home buyers for the same house as the DOM of a home rises.
Understand also, that just because a property has been on the market for longer than average market times you may still have to compete with other buyers. Especially, if the seller has made some recent adjustments like a price change, significant repairs etc…
But it will be far less likely.
Why Do Some Homes Stay on the Market Longer Than Average
There are several reasons why a home will linger on on the the market. It is is just as important that sellers pay attention to market time as well.
Most of it has to do with price. EVERY home is saleable at the right price. The right price is what a group of willing and able buyers are willing to pay. No matter what a seller thinks, if a buyer is not willing to step up and pay the price, the home is not priced fairly.
Under pricing there are a few reasons a home may languish. Not being prepared properly, location, falling short on amenities and features, etc… will usually lead to one or more price reductions before a home sells.
There are other reasons a home may not be selling. One is a seller does not allow access to their home for showings. Another is poor marketing of a home by a real estate agent.
Summary of Days on Market Data, What Does it Mean to A Home Buyer
As you can see the length of time or the Days on Market is one aspect of a listing to look at when it comes time to submit an offer on a property.
Combined with other data it can set the tone of your negotiations on a property. All too often in a strong sellers market, a home buyer newer to the market ignores the signs and way underbids and/or is way to stringent on price and terms. Yet, they are always upset they lost a great property.
Work with your local real estate agent to understand how the DOM can affect your offer along with other data points. Understanding days on market can help you avoid disappointment especially if you end up being one of multiple offers on a home.
Other Home Buying Resources:
- Paul Sian How DOM Effects Home Sale
- Bill Gassett Get Represented When Buying a Home
- Anita Clark Home Buying Costs Every Buyer Needs to Know About
- Ellen Pitts How Mortgage Rates Influence Your Monthly Payment
- Lynn Pineda How Much Should I Offer on a Home
Days on Market Data, What Does it Mean to A Home Buyer is provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell your home give me a call at 978-360-0422 and let’s get the process started.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford